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© I Know First 2014. All rights reserved.

Dr. Lipa Roitman

Founder

Yaron Golgher

CEO

www.iknowfirst.com

is a financial startup that

provides daily investment foresight based on

an advanced self-learning algorithm

We developed an advanced algorithm

based on artificial intelligence and machine

learning that also incorporates elements of

artificial neural networks and genetic

algorithms

Dr. Lipa Roitman, a scientist with over 20

years of experience, led our R&D team to

develop and consistently enhance the

algorithm

Our live portfolio from 2013 returned 60.66%

in 12 months beating the S&P 500 by 31.27%

A unique financial market forecasting algorithm that analyses, models and

predicts over 1,400 markets for short and long term:

Stocks

Commodities

ETF’s

Interest Rates

Currencies

World Indices

Firms that can consistently recognize the most opportunities and

overall trends has the key to the market

Market

Data

Market

Data

Market

Data

Market

Data

Market

Data

Buy & Sell Orders

60% -70% of the US equity market volume

Algorithms

An Advanced Mathematical Model

What is Algorithmic Trading? General

Two Methods of Algotrading,

High-Frequency and Quantitative Trading

1. High-Frequency Trading (HFT)

Real time intelligence, in milliseconds:

Place and quickly cancel small orders to find at what price the buyers and sellers are ready to trade.

Price-volume info to catch developing trends.

Simultaneously process volumes of information - human traders can’t compete.

Liquidate positions at the end of the day.

Technological costs of HFT are enormous.

High competition-low profit.

2. Quantitative Trading, or Longer Term Trading

Algorithms analyze the structure and the trends in the market, find

predictable patterns, and trade upon the machine derived

forecasts.

Suitable for most investors

Some of the trading strategies:

Trend following vs. mean reversion:

When to use which?

Market neutral

Delta neutral

Arbitrage

Two Methods of Algotrading,

High-Frequency and Quantitative Trading

Advantages of Algotrading

Costs

Human Factors Risk

Psycholgical Pressures

Volatility

Algotrading

Objective

valuation of

the stock

Quantitative

forecasting

the future

stock trend

Lower cost of

trading due to

the high

volumes

Reduced

buy-sell

spreads, esp.

in most liquid

securities

Why Governments are Clamping Down on HFT?

HFT is unfair to retail investor

The HFT traders have the first choice in the trade - a form of

scalping

Level field needed to give everyone an equal chance.

Several European countries and Canada are curtailing or banning HFT

due to concerns about volatility and fairness.

In crisis the algos liquidate positions in seconds, causing huge

imbalances and price swings

HFT and Volatility

Has algotrading evolved in recent years to pose less risk on the general

market?

The risk is still present.

Notable examples:

May 6, 2010 Flash Crash. The algorithms may have

caused it, but also quickly corrected it.

January 23, 2013 AAPL plunge

Latest in Algotrading

Interpreting news and automatic trading by the

machines.

It’s all about speed!

It’s All About Speed!

Advertising campaign by Dow Jones on March 1, 2008:

Claimed that their service had beaten other news services by 2 seconds

in reporting an interest rate cut by the Bank of England.

What is Machine Learning?

Mathematics, statistics and logics are the crucial tools in studying

the markets.

They offer testable, verifiable and predictive hypothesis.

Number crunching allows finding hidden laws, not obvious to

humans.

Steps in Machine Learning

Provide

Framework

Mathematical

Tools

Programming

Tools

Give

Examples

To Learn From

Input

Output

Fitness

FunctionSequential

Generalization

Requirement

What should be

optimized?

Example: Make

more good

predictions than

bad ones

Discover the laws

connecting the input and

output, cause and effect

Critical for forecasting

ability

An algorithm is a

step-by-step

procedure

Example Goal: Minimize the

Fitness Function

What is a Genetic Algorithm?

There are a number of search algorithms, from simple to complex, and

genetic is one of them.

Genetic algorithm is used for the most difficult problems, where exact

relationships are unknown, and maybe non-existent.

Many solutions are in the “gene” pool, some good, some not so.

Each solution is like a chromosome in genetics, hence the analogy.

Genetic is a circular iterative algorithm.

Genetic Algorithm

Gene Pool

Mutate

SelectReject

Genetic

Algorithm

Steps in Genetic Algorithm

Genetic algorithm uses these ways to improve the gene (solutions) pool:

Combination:

Combine two or more solutions in hope of producing a better solution.

Mutation:

Modify a solution in random places in hope of producing a better solution.

Crossover:

Import a solution from a similar problem

Selection:

Survival of the fittest

A unique financial market forecasting algorithm that analyses, models and

predicts over 1,400 markets for short and long term:

Stocks

Commodities

ETF’s

Interest Rates

Currencies

World Indices

Firms that can consistently recognize the most opportunities and

overall trends has the key to the market

Larger Institutions

Hedge Funds

Family Offices

Investment managers

Financial advisors

Professional investors

– Fund manager & I Know First subscriber

Loyal and Growing Client Base

I Know First grew 400% in

2013 from all over the world

Hundreds Of Clients

Worldwide

Academic Cooperation

Dr. Roitman lecture in Tel-Aviv

University (View it Here)

Projects with Harvard Business

School

Partner with international

Universities-internship programs,

lectures

There is more transparency than ever of fund

performance

To retain and attract new investors as well as other

mutual funds, a firm should be able to beat the S&P

500 on a regular basis

• Competition amongst investment firms is higher

than before

• To stay competitive investment banks are looking

for the most advanced tools to enhance their

performance

Transparency

S&P 500

Competition

Market Trends

The market is evolving beyond

previously established theories

however customers still expect

strong and consistent returns

Market Evolution

Investment firms need to stay one

step a head in order to be the first

to recognize trends and take

advantage of opportunities

Investment Firms

Traditional tools and fundamental

analysis are not enough to stay

competitive in the contemporary

market

Complex

of Traditional Tools and

Fundamental Analysis

Customer Challenges

The Algorithm

The results are constantly improving as the algorithm learns from its

successes and failures

Tracks and predicts

the flow of money

from one market or

investment channel

to another

The system is a

predictive model based

on Artificial Intelligence,

Machine Learning, and

incorporates elements of

Artificial Neural Networks

and Genetic Algorithms

Artificial

Intelligence

(AI)

Artificial

Neural

Networks

I Know First

predicts 1,400+

investment

channels daily

Synopsis of the algorithm

Daily data is added to our 15 years historical

file

Run a learning & prediction cycle with new combined data.

Daily predictions for each stock, currency,

commodity, etc..

Daily Market Heat Map

Two indicators:

Signal – Predicted movement of the asset

Predictability Indicator – Historical correlation between the prediction and the actual market movement

XOMA returned 61.45% in

1 month from this forecast

Two indicators:

Signal – Predicted movement of the asset

Predictability Indicator – Historical correlation between the

prediction and the actual market movement

Forecast vs. Actual

I Know First Sample Portfolio

Click To View

60.66% Return in 1-year beating

the S&P by over 30%

Main Features of the Algorithm

Identifies The Best Market Opportunities Daily

6 Time Frames

Tracks Over 1,400 Markets

Self-Learning

Adaptable

Always Learning New Patterns

Scalable

A Decision Support System (DSS)

Predictability Indicator

Strong Historical Performance – 60.66% gain in 2013

The algorithm becomes more and more accurate with every prediction as it

constantly tests multiple models in different market circumstances

Conservative

Stock

Forecast

Interest

Rates

Forecast

Gold

Prediction

Dividend’s

Forecast

Aggressive

Stock

Forecast

Currencies

Prediction

Industry

Forecast

ETF’s

Forecast

Commodities

Prediction

World

Indexes

Forecast

European

Stock

Forecast

Customized

Algorithmic

Forecast

Algorithmic Trading Strategies

To Implement With Mutual Funds

Top

Stocks

Forecast

Algorithmic Trading

Strategies To Implement With

Mutual FundsAssess Risk

Aggressive Stock Forecasts

Conservative Stock Forecasts

Assets That Carry A Dividend

Aggressive Dividend Forecasts

Conservative Dividend Forecasts

Recognize Top Performers In Each Industry

Bank Stocks Forecasts

Best Tech Stocks

International Opportunities

European Stock Forecast

Custom Forecasts

Customized Algorithmic Forecast

Only Buy Stocks With High Predictabilities

* A predictability of .2 is good but .5 is excellent *

Multiply the Signal And The

Predictability Indicator Together

Optimize Returns

&

Reduce Risk

Identify New Opportunities and

Double-Check Your Analysis

Buy All Assets In The Forecast

Of Equal Weights* Live Portfolio is based on this strategy *

Algorithmic Trading

FIVE Strategies To Implement

With Mutual Funds

Buy Stocks That Have A Strong

Signal In Each Time Horizon

Algorithmic Trading Tactical

Approach

The first appearance of a stock does not mean buy it at any price that

same day

Put it in a watch list, unless there is significant discount of at least

3%

Recognize the general color of the heat map

Consider the forecasts for major indexes to get an overall picture of the

market trend

We advise not to trade against

the general market trend

When analyzing stocks, review the specific industry

forecast as well

Algorithmic Output Chart: ALU

Apple Inc. AAPL Bubble CrashFinancial Bubble Detection

Algorithmic Output Chart: NOK

39

Network Virtualization

Fore

casting

Investing

Exch

anges

S&

P 5

00

1,400+ assets are forecasted

Track record of regularly beating the S&P 500

I Know First beat the S&P 500 by over 30% in 2013

Level of Confidence

The self-learning algorithm not only gives you a prediction but its level of confidence as well

Two different types of algorithmic outputs

Heat maps

Charts

Algorithmic trading is becoming more popular as it has proven more effective than traditional forms of analysis alone.

Algorithm’s are the future of financial analysis

Key Advantages of I Know First:

Algorithmic Trading

Recent Publications

How Can We Predict The Financial Markets ByUsing Algorithms? Tel-Aviv University Lecture –Dr. Roitman

Seeking Alpha articles – Dr. Roitman

Seeking Alpha articles –I Know First Research

Algorithmic Trading With